When it come to getting on top of our finances, sometimes there is so much advice out there listing differing priorities that it’s hard to know where to start writes Grainne McGuinness.
And when it comes to doing the right thing, so much of it depends on your age and individual circumstances. With that in mind, here are some of the crucial areas to focus on and common pitfalls to avoid, at every age.
Do - Take advantage of every special offer available. Financial institutions know that lethargy keeps most customers with the same bank for life, so they will all have offers to entice you to do business with them. Investigate each before deciding what is the best account for you. Similarly, from travel, to clothes shopping, to entertainment, companies offer students discounts in order to build relationships with them — never pay full price if you can avoid it. Bargain-hunting is a skill like any other, use your broke student years to build thrifty habits.
Don’t - Struggle in silence. The first experience of living away from home and paying bills can be overwhelming. Approach managing your finances like an additional new subject at college — learn the basics and build from there. Don’t borrow from or lend to friends, you have enough to do managing your own cash flow besides adding complications. The Money Advice & Budgeting Service have a budget calculator at www.mabs.ie, as well as advice on how to manage your money. If you do get in difficulty look for help at the earliest opportunity, be it from your parents or the Student Union. Ignoring problems will only make the situation worse.
Do - Consider starting a pension. Yes, retirement is almost inconceivable and you have plenty of other ideas on how to spend your earnings. But money you pay now will have decades to work for you and build up interest, far more so than money you put away in your 50s and beyond. You don’t need to put away a big chunk of your wages, but if you can afford it, consider contributing up to the tax relief limit — currently up to 15% of remuneration/net relevant earnings for Irish taxpayers under 30.
Don’t - Run up debt just because you can. When you get your first taste of a regular salary and access to a credit card, it is all too easy to start spending more than you earn. Yes, you want to enjoy your 20s and clock up those holidays and life experiences. But don’t enter your 30s saddled with debt just because you tried to live a Sex And The City lifestyle on a starting salary.
Do - Sort out health and life cover sooner rather than later. The Lifetime Community Rating means consumers are penalised if they are over 35 when they first take out health insurance, and the rates you pay for life insurance policies will also only increase as you get older. If you haven’t these sorted already, get them now. It is also worth considering taking out a specified serious illness policy. Statistics suggest that, of a group of people all aged 30, 56% of them will be diagnosed with a critical illness over the course of their lifetime, with an average claimant age of just 47. Having protection if the worst happens, takes at least one worry out of traumatic situations.
Don’t - Combine your finances without having a serious talk about how you intend to manage your money into the future. Too many couples avoid properly declaring their financial position to each other up until, and even after, they wed. If you’re planning a lifetime together, that has to include a money talk. You need to know how much each other earns and any existing debt that might also be coming to the table. One current account or two, how many credit cards and how will childcare be paid for? These are questions to be thrashed out before you are settled in domestic bliss, in order to avoid conflict or unpleasant shocks down the line
Next week: Financial tips for people in their 40s, 50s, 60s and beyond.
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